I am working with EU-KLEMS data, and I am using TFP growth as a proxy for technological change. However, there are 2 variables for TFP - TFP based on Gross Output and TFP based on Value Added.

I understand that Value added in this case might be Gross Output-intermediate consumption, but I am not sure whether this is indeed the case, as there is no such explanation in the EU-KLEMS dataset. The two TFP measures move in a similar fashion across industries, but there are indeed some differences - for example, the VA TFP average increases at a much slower rate than the GO TFP.

I would be eternally grateful if some clarification could be provided on these two measures.


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